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DJM - Statement of Affairs released

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12 minutes ago, njee20 said:

deposits from new funders were needed to provide the funds to fulfil the older orders

 

Did these older orders make it into production? I think the J94 and class 71 were already in production, one commercial the other "crowdfunded" although backed up by batch orders from model shops, so by the time the King, 92 and then APT came along there was very little actually in production. I'm not sure where the Mermaids fit in this, I thought they were also a commercial release.

 

In retrospect, it's perhaps a shame Dave had a entire part of the forum to play with exclusively until he'd properly proved himself, as the multiple threads and product announcements probably gave an appearance of a manufacturer with more clout and worth than he warranted at the time - and is obvious now. But hindsight is indeed wonderful and I'm sure a lot of people would do things differently now - especially the ones with multiple APT deposits in limbo.

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9 minutes ago, DavidH said:

In retrospect, it's perhaps a shame Dave had a entire part of the forum to play with exclusively until he'd properly proved himself, as the multiple threads and product announcements probably gave an appearance of a manufacturer with more clout and worth than he warranted at the time

 

But he was an award winning manufacturer .....as he constantly liked to remind people. :rolleyes:

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I’m not sure anyone was under any doubt that he was announcing products hand over fist without delivery, having a specific forum area probably made that more obvious. 

 

As I said, there’s no evidence it was a Ponzi scheme, it may have been, but if he wasn’t getting enough order across all products to fund even one then it’s irrelevant what sort of scam you’re trying to run. 

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9 hours ago, john new said:

Currently, being retired, I am lucky enough to be able to do my work for the SLS* funded by my pension income, we know from a recent quote that what I do saves the Society £9k pa minimum.

Around the time I retired I did some Fundraising, Project Management, and H&S roles on a project for our tennis club. From the qoutes we had at the time it saved about £5k on the fundraising / Admin, £7k on design / management and £2k on H&S. I sometimes think that people starting projects or businesses fail to realise how much these 'Overheads' add to the cost of a job.

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It would certainly appear that in the case of DJM Ltd (not necessarily DJ - we don't know), the only significand income stream latterly (apart from funding circle borrowing shown in the S of A) was crowdfunding, as there have been no company financed product for some time, to the extent these went through the company account or that of DJ has been a question. That from these funds there should have been an element of remuneration to DJM allowed for in each project is probably not in question. However should it not have been expressly stated what that was to be, and the circumstances under which it could be drawn down in the terms and conditions under which people committed to the various ventures?

 

The issue is that "T&Cs" appear almost non existent from what I can gather and silent on this matter. So, the question I ponder is whether in the absence of clarity it should imply a blank cheque or should it be what is reasonable as a proportion of income and progress (Man on Clapham Omnibus again)?

 

I certainly agree with Stationmaster that any drawings should be proportionate to income received and not so great as to prejudice the underlying project, but is this any legal imperative?

 

Roy

 

 

 

 

 

 

 

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There is evidence it was a Ponzi scheme. It is not conclusive yet and I am not saying it was but it cannot simply be dismissed. There were definitely elements of it.

 

There seemed to be more money going out than was coming in. We do not know where it went but plenty have suspicions. The only thing that kept it going was new model funding. All the while the cash was being burnt through with no models to show for it.

 

If Dave was taking a healthy salary from this enterprise from day one it was never going to succeed and would always be playing catch up as it was never big enough to support this. It would have needed to grow and build over time. I really do not think he had any ability to grow the business into a sustainable one. I just do not know if this was due to ineptitude or deception or a mixture of both. The way he let things end and just walked does not speak well of his character.

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It has the appearances of one, yes, but not really any evidence, indeed the lack of evidence of anything whatsoever is part of what makes it look quite so dodgy IMO!

 

If a business runs out of cash you have little choice but to call in the liquidators and walk. You can’t refund people without money to do so, however noble that may be in theory. 

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15 hours ago, john new said:

Agree. Looking at this logically a basic 48 weeks (so allowing holiday time) and a 5 day week = 240 days. Say a 7 hour full time day at £8 per hr (Circa minimum wage) this equals 240x £56 = £13,440. Were I to be looking to use my skills as a magazine/book designer to do a new work project like this commercially  in the publishing arena the expectation would be for drawing more than the minimum wage.

 

Currently, being retired, I am lucky enough to be able to do my work for the SLS* funded by my pension income, we know from a recent quote that what I do saves the Society £9k pa minimum. We aren't talking about doing these models as a Club/Society project voluntarily for love, it was DJ's job. The point of this post, surely no-one would expect him to be doing this for love until the project is completed. DJModels was a business so why wouldn't some % of the crowd-funding money be going to pay him a salary? 

 

Whatever the reason for DJ allowing this project to fail, be it Dave getting his sums wrong or something unforeseeable (as yet we don't know/may never know) I think it is harsh to be saying he wasn't entitled to be drawing an element of the crowd funding income going into DJModels as his salary.

 

*not full-time

Forgot to add, at least four other officers/Directors are also doing work f-o-c that is off setting similar £ amounts.  

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I don't think anybody thinks DJM should have worked for free, like I've already said if he could make models so efficiently that he could undercut rivals on price and offer customers a good product whilst also doing very well out if himself then I'd not begrudge him the winnings. That'd indicate a very talented and capable individual. His business plan (OK, I'm making an assumption there) and pricing should have incorporated his own needs and developed plans and pricing which could reasonably be predicted to provide enough for those needs. The average salary in the UK seems to be £29k, did he value himself above that? If he valued himself at 2 or 3x or more than that it would be his business if the business was successful. And he was presumably expecting the value of the company to grow and for his capital assets etc to expand quite aside from his working income. He would obviously have had a range of entirely legitimate expenses such as business trips to China, office expenses, professional support fees such as the services of an accountant and in the event that he did get product then it'd need to be distributed etc, some money for warranty claims, insurance, marketing etc etc and the other expenses of running a small business.

 

So whatever money which was flowing in to the business had to support product development and manufacture, the expenses of running the business including his own cut. If we extend the courtesy of assuming that as per his frequent assurances projects like the APT had managed to reach the minimum necessary order number then there was a significant amount of money that entered the business, and we know there were other sources of funding such as aP2P lender and in the early stages commissioning work. Usually for a one man operation in a field where product development and manufacture is expensive and company overheads low (or they should be) I'd expect product development and manufacture costs to be the big drain on cash, however it does not appear that the money was flowing out to his suppliers (judging by what seems to have been the situation with the factories) and the company actually delivered very little given the period of time it was operational. So most of the money seems to have gone into paying DJM's own costs which for a one man outfit shouldn't have been that high depending on how much he was taking out. It does appear that the money which flowed in was primarily paying DJM's own overheads, including whatever DJ received as a salary and fees.

 

As I say, if the company was successful it'd be nobody else's business what DJ expected to make out of it personally, but it wasn't successful and there is a list of creditors who are probably going to get nothing. Even the retail customers who paid by credit card companies, yes the CC companies will compensate them but that just means that the CC companies lose, moving what he owes from customers to CC companies. 

 

Something I find striking is this, I know quite a few people who've started their own businesses in fields like engineering consultancy, marine survey and professional services. Some has succeeded, others didn't and returned to working for somebody else. However in every case in the early years they were on the bones of their backsides in terms of their own lifestyle as everything was going into the business and they were concentrating on consolidating the business, and they were working very long hours and throwing themselves into it. Yes, some of them now lead enviable lifestyles but I saw what they sacrificed and the efforts they made to get there and don't begrudge them. Equally those that failed threw everything in and didn't fail for a lack of work ethic or trying. They weren't indulging themselves by taking exotic holidays, indulging in hobbies, seemingly spending half their life on forums in the way of DJ at a time when he should have been making DJM work if he was serious about it all. 

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The recent thread mentions by various people of what Dave did or didn't draw in terms salary, expenses etc are interesting, but something I haven't seen mentioned is the house that Dave told us he had (re)mortgaged to support his company.  He suggested at the time that the proceeds of the mortgaged property were supporting the development of DJM, so unless Dave either sold the property, or repaid the mortgage, that would still be a liability for him or his relatives to repay presumably ?  

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On 05/07/2019 at 08:49, Joseph_Pestell said:

 

You seem to be a bit out of touch where mainstream banking is concerned - about 30 years out of date. These days banks are very cautious and will only lend to about 70% of project value even on really sound project. And that with lots of guarantees, etc.

 

As a former banker myself - and only about 20 years out of date - perhaps I could comment.

 

Back then, banks were (as they probably still are) the principal source of small business start-up funding.  You took your business plan - however rudimentary - to the bank manager, who analysed it as far as it allowed analysis; and asked you lots of questions about your experience, your aspirations, and what your 'Plan B' was if things started to go wrong.  It was uncommon for the Bank willingly to lend 100% of the costs required, because it was seen as essential the would-be business proprietor had some "skin in the game".  As I have said before on here, a bank doesn't regard itself as an 'investor', only a 'lender'.  If the proprietor effectively has nothing to lose and things start to go wrong they can walk away any time they like, leaving the Bank to carry the can (and typically take the blame from the creditors as being the trigger for the collapse due to being unwilling to extend further credit).

 

Even back then, therefore, the Bank would not usually lend 100%; and for any significant sum would seldom lend at all without some form of 'security' - typically a director's guarantee supported by a second mortgage over the domestic home, since that was the only significant asset most people owned.  But lend we did - typically about 8-9 out of ten propositions were sanctioned (with or without conditions) in 'good times', and 7-8 out of 10 even in 'bad times'.  And to an extent, although there were of course 'criteria', there was a fair bit of 'subjectivity' in the decisions too; the Manager could and often did follow a hunch that somebody had the 'right stuff' about them, and go out on a limb for them.

 

We didn't always get it right.  If a bank turned you down because they thought you and/or your business proposition weren't up to it, then you always had the option to present it to another bank.  If say three different banks had turned you down you really did ought to take the hint, though ...!

 

As I understand the situation these days, what has changed is a far lesser degree of 'subjectivity' in the process.  Indeed, it is more of a 'process', with computerised Credit Scoring and analysis techniques taking much of that personal judgment element out of the equation.  This has somewhat improved the ratio of bad debts, at a cost of some flexibility in the ability to back something a bit 'left-field'.  However, as gar as I can gather, the general proportion of propositions approved or declined is not materially different, and continues to flex with the general economic climate.  We have been in a long run of comparatively 'bad times' - for the economy generally and the banks themselves in particular - so the appetite for more marginal lending has been lower for some while now.  One of these days that will change ...

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I must admit my own view has always been that if somebody isn't willing to put their own money into funding their ideas then why should anybody else?

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Posted (edited)

We dance around the same circle, but the issues become ever more clearly defined.

 

If the Class 92, APT and King projects were fully funded at first instalment stage (as Dave Jones said they were), this should have represented almost £200K of inward cashflow over the last 2.5 years There was also a directors loan for £50K and the £30K Funding Circle loan. 

 

DJM should not have lost money on the J94 which had multiple runs. The Class 71 was crowdfunded, so he shouldn't have incurred losses there. He can hardly have lost money on his commission models - it wasn't his money that paid for them.

 

If the J94 and 71 did not recover their costs then it's difficult to see how other projects could have been viable, and he should have shut down sharpish

 

The only big definable loss is the Class 17, but the loss of control of the tooling suggests DJM did not in fact pay over the full cost to the Chinese factory. At EP stage the tooling would surely not have been fully paid for. Even if it was - unlikely - this just about equates to the Directors Loan  and Funding Circle monies.

 

So - he should have taken close to £200K in crowdfunding , and it seems difficult to believe that funding himself for 2.5 years burnt it all.

 

We have heard that CAD is relatively cheap and his factory might have back-loaded the cost onto the tooling. Again this can't absorb much of the money. Even Dave only reported £33K of CAD and scans, and that will include book value for the IP registrations, and CAD for J94, Cl 71, Mermaid, Shark etc

 

But there's £23K of additional trade debt, and the crowdfunders and their money appear nowhere. There's only £4800 left in the pot

 

It's difficult to see where the crowdfunding money can have gone.

 

But if the projects weren't fully funded - or anything like - then why on earth did he proceed?? The costings may have been stretched to deliver the project even if fully funded. (We are not now talking about a marginal undershoot , proceeding with 90% of target funding. That could have led to big problems down the track, but there should still have been a significant pot of money left in the bank. We are now considering scenarios where the financial gap means the projects were less than 50% funded...)

 

It's also a little difficult to see why the 92 wouldn't have been fully subscribed. There is a market for RTR 92s, as evidenced by Accurascale, by the prior existence of Hornby and Lima models, and CJM in N , and by the success of Revolution's funding

 

Dave was first in the field, he had the market to himself for a long period , and his target number may well have been a bit less than Accurascale's, never mind Hornby. If Kernow can make the numbers work for D6xx, and Model Rail for USA tanks why on earth couldn't DJM secure the orders for 92s in OO - something much more numerous, with a much wider range and longer service life than D6xx or USA tanks

 

Whichever option you look at , there is still a big unexplained gap 

Edited by Ravenser
clarify point in last but 4 para - see italics
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14 minutes ago, Ravenser said:

 

If the Class 92, APT and King projects were fully funded at first instalment stage (as Dave Jones said they were), this should have represented almost £200K of inward cashflow over the last 2.5 years There was also a directors loan for £50K and the £30K Funding Circle loan. 

 

Did he actually say that? That they were fully first stage payment/deposit funded to give them the nod to proceed. I got the impression it was more about having sufficient numbers and that, as we have heard, it included people who only expressed interest (and didn't pay anything) and retailers who committed to numbers to make up the shortfall (but were also unlikely to have paid anything).

 

G

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39 minutes ago, Willie Whizz said:

 

As a former banker myself - and only about 20 years out of date - perhaps I could comment.

 

<snip><snip>

 

As I understand the situation these days, what has changed is a far lesser degree of 'subjectivity' in the process.  Indeed, it is more of a 'process', with computerised Credit Scoring and analysis techniques taking much of that personal judgment element out of the equation.  This has somewhat improved the ratio of bad debts, at a cost of some flexibility in the ability to back something a bit 'left-field'.  However, as gar as I can gather, the general proportion of propositions approved or declined is not materially different, and continues to flex with the general economic climate.  We have been in a long run of comparatively 'bad times' - for the economy generally and the banks themselves in particular - so the appetite for more marginal lending has been lower for some while now.  One of these days that will change ...

My work background is in Financial Services, primarily Stockbroking (I was FSA registered for Investment advice work) and for the last 10 years of work is was involved in Actuarial work. However I came to those via branch banking, last working in a branch 35 years ago. So my experience is even more out of date but I would heartily endorse what has been said. Indeed even back then personal loans were being assessed via credit scoring.

 

Looking at the statement of affairs the information is sorely lacking given what we were led to believe with regard to the level of pre-orders. There is no point is speculating about numbers, amount of cash or where it went. However I do recall in one post on here that DJ said he had put hi house on the line. That would back up what Willie Whizz has said, and which I also said, in that I would not have expected any loans to the company to be unsecured but rather backed by Directors guarantees which, in turn, would be supported by a second or subsequent mortgage on the directors house. And in respect of those I, when working in the branch network, used to deal with executing the documents for guarantees and mortgages. It was enough to keep, even in a small branch, two or three staff busy.

 

 

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25 minutes ago, Ravenser said:

 

But if the projects weren't fully funded - or anything like - then why on earth did he proceed?

 

I also get the impression, that despite what he said, the APT, class 92 and King project never did proceed to the tooling stage with authorisation for factories to cut metal. I'd guess they'd want some sort of deposit payment/gaurantee and he doesn't appear to have had that sort of cash.

 

G

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25 minutes ago, grahame said:

 

I also get the impression, that despite what he said, the APT, class 92 and King project never did proceed to the tooling stage with authorisation for factories to cut metal. I'd guess they'd want some sort of deposit payment/gaurantee and he doesn't appear to have had that sort of cash.

 

G

 

It seems pretty clear from what has been disclosed that this is indeed the case, it was always a case of almost ready, just about to...., tooling imminent...... whereas for the crowdfunded projects there appears to never have been the wherewithal to make it happen. I do wonder whether the disputes with the factory regarding tooling to the J94 and Clayton caused them to become more wary and stipulating conditions that he could not meet, but even if it were a case of cash up front, assuming he got his sums right, the stage payments should have provided cash in the bank to allowed that to happen. The fact that the cash was not there brings things full circle to the same question - why? Was it spent on other things or simply never there to start with?

 

There is probably only one person who can truly answer that question, but based on the fact that as yet this hasn't happened (in the public domain anyway) I am not holding my breath. It certainly does appear that the said party is  unapologetically getting on with his life as if nothing had happened from what has been said above. It certainly wouldn't surprise me, if he has abdicated any responsibility for what has happened, there certainly appear to have been a number of previous examples where blame for things going wrong was deftly shifted to others.

 

Roy

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3 minutes ago, Roy L S said:

 

The fact that the cash was not there brings things full circle to the same question - why? Was it spent on other things or simply never there to start with?

 

 

I'd imagine it was a bit of both rather than one or the other. Insufficient cash raised through investment and deposit payments and much of what was then spent on other things like laser scanning parties, CAD, website, advertising, mermaid production, running costs and salaries.

 

G

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57 minutes ago, grahame said:

 

Did he actually say that? That they were fully first stage payment/deposit funded to give them the nod to proceed. I got the impression it was more about having sufficient numbers and that, as we have heard, it included people who only expressed interest (and didn't pay anything) and retailers who committed to numbers to make up the shortfall (but were also unlikely to have paid anything).

 

G

Working on past posts from DJ

 

The 'King' wasn't fully subscribed but a trade order (Digitrains) 'has pushed it over the line'

I'm not sure about the Cass 92 but the implication of various posts was that there was sufficient crowdfunder support to proceed with the project. 

The 00 APT was definitely stated to have not only achieved the required number of crowdfunders but had a 10% surplus above the number needed.

 

That's a summary of what was said and the actual position might of course differ (even considerably).

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32 minutes ago, Roy L S said:

 

It seems pretty clear from what has been disclosed that this is indeed the case, it was always a case of almost ready, just about to...., tooling imminent...... whereas for the crowdfunded projects there appears to never have been the wherewithal to make it happen. I do wonder whether the disputes with the factory regarding tooling to the J94 and Clayton caused them to become more wary and stipulating conditions that he could not meet, but even if it were a case of cash up front, assuming he got his sums right, the stage payments should have provided cash in the bank to allowed that to happen. The fact that the cash was not there brings things full circle to the same question - why? Was it spent on other things or simply never there to start with?

 

There is probably only one person who can truly answer that question, but based on the fact that as yet this hasn't happened (in the public domain anyway) I am not holding my breath. It certainly does appear that the said party is  unapologetically getting on with his life as if nothing had happened from what has been said above. It certainly wouldn't surprise me, if he has abdicated any responsibility for what has happened, there certainly appear to have been a number of previous examples where blame for things going wrong was deftly shifted to others.

 

Roy

The factory shich made the J94 and Class 71 (and various commissioned models) plus had worked on the Class 17 and the original Class 92 was no longer working with DJ as there was some sort of dispute between them and him.    As he posted at the time the new crowdfunded models were at a different factory and I can add  (which he didn't) that as far as the 'King' was concerned (and probably the Class 92) it was working on a backloaded financial arrangement I've previously described.   I don't know if the APT was also at that factory or elsewhere.

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Posted (edited)

 

Quote

DJM should not have lost money on the J94 which had multiple runs. The Class 71 was crowdfunded, so he shouldn't have incurred losses there. He can hardly have lost money on his commission models - it wasn't his money that paid for them.

 

If the J94 and 71 did not recover their costs then it's difficult to see how other projects could have been viable, and he should have shut down sharpish

J94... 1 run only, supported at the time by commissions from Hattons, Kernow, Rmweb, +Wilbur.

 

This was the yellow flag, that got me wary of going further... it was highly supported, yet there was no support from a second run, there was comments about increasing costs and losing money by DJ himself.

 

yet after the first release DJ announced a second run, including a highly desirable MSC J94... yet nothing...

 

A second release should be a low cost lap of honour by reusing a tooling and maximising revenue and churning this out asap would make sense but nothing ..why ?

 

 

The 71.. just like the HUO, Q7, cl 59.., king, 14xx, 13xx, turbot, its amazing someone on the inside had no idea someone else was doing it...even outsiders seem to have better luck guessing, and he apparently had no idea, despite working for one of them, commissioning for another...(though they very publicly separated) indeed my first instinct to guess who was making what next was to start at the DJ new announcements thread and guess who was going to announce it next.

 

Of course the 71 was all locked in and loaded, but at that time trust by retailers was apparently high enough to carry their own limited editions of the 71... that ebbed away.

Edited by adb968008
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5 minutes ago, Roy L S said:

 

It seems pretty clear from what has been disclosed that this is indeed the case, it was always a case of almost ready, just about to...., tooling imminent...... whereas for the crowdfunded projects there appears to never have been the wherewithal to make it happen. I do wonder whether the disputes with the factory regarding tooling to the J94 and Clayton caused them to become more wary and stipulating conditions that he could not meet, but even if it were a case of cash up front, assuming he got his sums right, the stage payments should have provided cash in the bank to allowed that to happen. The fact that the cash was not there brings things full circle to the same question - why? Was it spent on other things or simply never there to start with?

 

There is probably only one person who can truly answer that question, but based on the fact that as yet this hasn't happened (in the public domain anyway) I am not holding my breath. It certainly does appear that the said party is  unapologetically getting on with his life as if nothing had happened from what has been said above. It certainly wouldn't surprise me, if he has abdicated any responsibility for what has happened, there certainly appear to have been a number of previous examples where blame for things going wrong was deftly shifted to others.

 

Roy

 

The djm statements of the kind outlined above were lacking in factual content or evidence.  What seems to have been missing are statements of the level of funding numbers for each of the proposed products.  Had sufficient financial income been there, there would have been considerable benefit in reporting the fact and associated confidence levels for those customers.  I can't think that any such numbers which might have been successfully been achieved would not have been shouted to the same roof-tops as the vague ideas identified above.  I am not talking about actual amounts of "cash" flowing in, but statements that 100% of crowdfunder numbers required have been reached.  What is not said, is often more important than that which is said.  In fact the few crowdfunding numbers published have generally shown considerable shortfall in required numbers and the lack of information on others strongly suggests that funds were not incoming, in sufficient numbers, as would enable the projects to be properly funded.

 

.....  add to that the wages equation, where a project goes beyond the time planned for and the 20% [?] allocation for 18 months wages becomes 40% for 3 years, even more for longer delays.  Given the numbers of new projects and the lack of keeping to the planned times, the crowdfunding number information [lack of] indicates that sufficient funds were not available in the first place and director's expenses were a much bigger drain than planned for.

 

Regards

 

Julian

 

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15 minutes ago, The Stationmaster said:

Working on past posts from DJ

 

The 'King' wasn't fully subscribed but a trade order (Digitrains) 'has pushed it over the line'

I'm not sure about the Cass 92 but the implication of various posts was that there was sufficient crowdfunder support to proceed with the project. 

The 00 APT was definitely stated to have not only achieved the required number of crowdfunders but had a 10% surplus above the number needed.

 

That's a summary of what was said and the actual position might of course differ (even considerably).

 

Yep, 'implications' and 'number of crowdfunders' don't necessarily equate to a fully paid first stage funding. His April statement mentioned that the 'N gauge class 92 tooling was imminent' not that there were sufficient numbers or deposits.

 

G

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16 hours ago, Covkid said:

The recent thread mentions by various people of what Dave did or didn't draw in terms salary, expenses etc are interesting, but something I haven't seen mentioned is the house that Dave told us he had (re)mortgaged to support his company.  He suggested at the time that the proceeds of the mortgaged property were supporting the development of DJM, so unless Dave either sold the property, or repaid the mortgage, that would still be a liability for him or his relatives to repay presumably ?  

 

Mentioned it a month ago:

 

 

In short, Dave doesn't appear to have said anything about mortaging or remortgaging. Or at least, I can't find any statements to that effect.

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Posted (edited)
1 hour ago, DavidH said:

 

Mentioned it a month ago:

 

 

In short, Dave doesn't appear to have said anything about mortaging or remortgaging. Or at least, I can't find any statements to that effect.

 

But a directors guarantee supported by a second mortgage on the house is supported by that claim. The second mortgage doesn't mean he has borrowed against the house but has put up his equity in the property to support the company. The lender and the guarantor sign a mortgage deed that means the lender has a claim on the equity in the property if the guarantor fails to pay up under the terms of the guarantee.

 

The bottom line is that, in all likelihood, there is a lender out there with a second mortgage over DJ's house.

Edited by Richard E
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